At the beginning of the year, the long-term debt of a firm was $72,918 and total debt was $138,407. At the end of the year, long-term debt was $68,219 and total debt was $145,838. The interest paid was $6,430. What is the amount of the cash flow to creditors?

Question

Quizplus · Accepted Answer

Cash flow to creditors can be calculated as follows:

Cash flow to creditors = interest paid - net decrease in long-term debt

Net decrease in long-term debt = (beginning long-term debt - ending long-term debt) = ($72,918 - $68,219) = $4,699

Therefore, cash flow to creditors = $6,430 - $4,699 = $1,731

Hence, the correct option is (C) $11,129.

At the Beginning of the Year, the Long-Term Debt of a Firm